Financial documents of a company prepared for tax filing purposes is the purview of accounting professionals who have the relevant training and experience for that work.
Normalizing financial documents prepared for tax purposes for use in a business valuation; requires an entrepreneurial valuator with prior long term relevant business owner operator experience
An entrepreneurial valuator has no doubt bought and sold Intangible Assets. This is what gives them the extra experience required to normalize assets to correctly determine “fair market value” as required in the Canada Income Tax Act Policy Paper.
Business experience is going to suggest to the entrepreneurial valuator that the balance sheet inventory of boats in late September will need to be discounted as opposed to a May 1 effective date of valuation. Relevant business experience is going to help the entrepreneurial valuator to effectively and accurately determine and adjust fair market wages in the normalization process for the profit and loss statement. These are just two of the many normalizations that are the purview of entrepreneurial business valuator.
“None of the top 150 valuators in the world are accountants.”
The top business valuators in the world are Venture Capitalists like Elon Musk, Peter Thiel, and our Canadian example Mark D Wiseman.
Of the 200,000 honest, hard working, professional accountants in Canada; less than 1% suggest they can do business valuations.
We believe this radical 1% of would be monopolists have no business doing business valuations in 2023 using outdated, unreliable, misleading and dishonest approaches to business valuation.
These outdated approaches are: Hard Asset, Income and Market approaches to business valuation.
Those 1% and their methodology was proven wrong in 2009 by Mark D Wiseman and the Canadian Pension Plan Fund.
Canadian Venture Capitalist Mark D Wiseman, working with the Canadian Pension Plan, valued a block of shares of a company that had financial statements showing huge losses (SKYPE), and purchased that block at $300 MILLION USD. Mark D Wiseman was also instrumental in selling that same block of shares for well over a BILLION USD two years later.
That day in 2009 was the day when accounting based valuators had their methodology turned on its head.
Mark D Wiseman has been added to a list of the top 150 Venture Capitalists in the world (Researched in March 2023) NONE OF WHOM are accountants.
The 150 top Venture Capitalists in the world who value some of the world's most valuable companies should be considered the world’s best valuation experts. And again, none of them, to the best of our research, are accountants. Does anyone seriously think these top experts would employ the old hard asset, income, or market approach to business valuation used by most accountant based valuators today? Ask Warren Buffet?
Venture Capitalists use honest accountants to supply reliable financial data that has generally been arranged for tax purposes. Clients have already paid these accountants tens of thousands of dollars to produce these documents that are generally needed to start a valuation.
This is also the basis of Eric Jordan’s “25 Factors Affecting Business Valuation” methodology. Honest Accountants produce the financial records required to start the valuation process. This is where, in private company valuations, experienced business owner/operators take over. These people with 15 years or more of relevant business owner/operator experience, are trained in the use of Eric Jordan’s “25 Factors Affecting Business Valuation”. They identify, measure, weigh, and put an estimated value on the intangible assets that make up the majority of most company value since at least 2009. This is when the Mark D Wiseman/Skype moment changed business valuation history.
Clients have paid their accountants tens and sometimes hundreds of thousands of dollars for accounting. We trust these professionals FOR ACCOUNTING AND TAX PURPOSES; but NOT for Business Valuation.
NONE of the top 150 valuators in the world are accountants.
Consider Warren Buffet and his partner Charlie Munger and what they have to say about accountants overeaching, and not staying in their proper lane. And not sticking to accounting.
Charlie Munger on accountants:
Warren Buffet on accountants:
The 99% of Accountants who stick to accounting are well respected. The other 1% give the rest a bad name.